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sweet [91]
3 years ago
11

Young Co. issues $800,000 of 10% bonds dated January 1, Year 1. Interest is payable semiannually on June 30 and December 31. The

bonds mature in five years. The current market for similar bonds is 8%. The entire issue is sold on the date of issue. The following values are given:Present Value ofOrdinary Annuity Present Value of $1---------------- -------------------N=10; i=0.04 8.11090 0.67556N=10; i=0.05 7.72173 0.61391What amount of proceeds on the sale of bonds should Young report?A. $799,997B. $815,564C. $849,317D. $864,884
Business
1 answer:
Andreyy893 years ago
4 0

Answer:

Young should report proceeds from the sale of bonds as equal to $864,884

Explanation:

The proceeds on the sale of bonds is equivalent to the present value of all the cash flows that are likely to accrue to an investor once the bond is bought. These cash-flows are the periodic coupon payments that are paid semi-annually and the par value of the bond that will be paid at the end of the 5 years.

During the 5 years, there are 10 equal periodic coupon payments that will be made. In each  year, the total coupon paid will be

$800,000*0.1=$80,000

and this payment will be split into two equal payments equal to \frac{$80,000}{2} = $40,000 . This stream of cash-flows is an ordinary annuity

The periodic market rate is equal to \frac{0.08}{2}=0.04

The  PV of the cashflows = PV of the coupon payments + PV of the par value of the bond

=$40,000*PV Annuity Factor for 10 periods at 4%+ $800,000*\frac{1}{(1+0.04)^10}

=$40,000*8.1109+$800,000*0.67556=$864,884

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Explanation:

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These these factors will help Mr. Jones to understand that fraud will be prevented and detected.

3 0
3 years ago
Which of the following countries experienced a decline in total output from 2000 to 2005?
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Answer: The correct answer is "B. Zimbabwe".

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In the case of Zimbabwe, population growth is far superior to GDP growth, therefore this makes economic growth much more difficult since there are more people per capita income is diminished.

7 0
3 years ago
Byron agrees to sell to Charity, for $1,500, a remote parcel of land.They believe the land to be worthless, but beneath it is a
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Answer:

D) enforce the contract.

Explanation:

Neither party knew about the gold mine before the deal was made, Byron and Charity even thought it was worthless. If Charity by accident, chance or luck discovered the gold mine, then she is entitled to it. Even f Byron wants to cancel the deal, he can't because Charity acted on good faith and the discovery of the gold mine was not something planned or intended.

For example, if I like an antique at a yard sale and I purchase it at $5, and then by chance someone that knows about antiques tells me that it is really expensive, a made a lot of money and the previous owner doesn't have the right to cancel the sale.  

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3 years ago
Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of
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Answer:

Annual Rate of Return = 12%

Effective Annual Rate of Return = 9.6%

Explanation:

Nominal Annual Rate of return = \frac{Dividend\: per\: share\: for\: each\: year}{Par\: price\:per\:share} \times 100

Annual Dividend per share = $3 per quarter \times 4 = $12 per share

Current price per share = $125

Par Price per share = $100

Thus Annual Rate of return = $12/$100 = 12%

Effective Annual Rate of Return = \frac{Dividend\: per\: share\: for\: each\: year}{Current\: price\:per\:share} \times 100

= \frac{12}{125} \times 100 = 9.6%

Final Answer

Annual Rate of Return = 12%

Effective Annual Rate of Return = 9.6%

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When must you inspect your tools and extension cords?
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